Skullcandy shares tumble after CEO steps down

Shares of Skullcandy tumble on news of CEO's resignation, worries about 2013 profits

Associated Press

NEW YORK (AP) -- Shares of Skullcandy Inc. tumbled Friday after the company, which makes headphones emblazoned with a skull logo, said its CEO was leaving to take another job.

THE SPARK: The Park City, Utah-based company said late Thursday that Jeremy Andrus is stepping down as president and CEO to join a private investment firm. Rick Alden, the company's founder, former CEO and a current director, will serve as interim CEO while Skullcandy's board searches for a permanent replacement.

Skullcandy also warned that its adjusted profit for the year will likely come in at the low end of its November forecast of $1 to $1.04 per share. Analysts polled by FactSet expect a profit of $1.01 per share.

THE BIG PICTURE: Skullcandy, which went public in July 2011, also makes decorative iPod cases and T-shirts emblazoned with its skull logo. Its products are sold in electronics, sporting goods and mobile phone stores, as well as by mass retailers such as Target and Best Buy.

Like other makers of personal electronics and accessories, Skullcandy has had to deal with increasing competition and the changing preferences of finicky consumers. Shares have lost about 56 percent of their value over the past 12 months.

THE ANALYSIS: "Jeremy Andrus was the primary architect behind much of (Skullcandy's) current business model, including the move to increase (research and development) expenditures...we do worry that a change in management could lead to another disruptive change in strategy," said KeyBanc Capital Markets analyst Edward Yruma, cutting Skullcandy to "Hold" from "Buy" in a client note. Still, Yruma said that Alden likely remains familiar with Skullcandy's business and will build on what Andrus had developed.

Jefferies analyst Randal Konik said that Alden's return for now is "encouraging," management turnover makes Skullcandy stock a more risky investment. He also remains worried that increasing competition in the headphone market will cause earnings to drop this year. He cut his price target by $1 to $5 while keeping an "Underperform" rating on Skullcandy shares.

SHARE ACTION: Down 45 cents, or 6.8 percent, to $6.16 in afternoon trading, after dropping as low as $5.98 earlier in the day — its lowest price since going public in July 2011 at $20 per share.

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